Notices from the Income Tax Department are very common these days due to their pepped up Tax compliance measures thru computerized / automated rules.
While Receiving IT Notice is not a fun for anyone, it may create some panic among the taxpayers. The taxpayers need to react quickly, and within the specified time limit to address the queries from IT Department to clear the notice and / or Tax dues, if any.
This document covers
- Top 7 Reasons
- How to avoid IT Notices?
- What would be the next steps?
1. Top 7 Reasons
Per EZTax.in Team, below are Top 7 reasons why a Taxpayer may get an Income Tax Notice from the Department
1. Mismatch of Income between form 26AS and Income Tax Return
If the Income declared in IT Return does not match with Form 26AS, then the ITD may serve the notice to the taxpayer for arithmetical inaccuracies. The Taxpayer should submit either the revised return or submit the response to the query.
2. Error in TDS Amount
The TDS claimed in the Tax return should match with the Form 26AS. Otherwise, the ITD may serve the notice on the taxpayer to correct the TDS amount. Prepare a defective IT return and upload the json on the ITD Portal
3. Discrepancy in Tax Returns
If the taxpayer have forgotten to include any income like interest, commission income etc., or claimed deductions under wrong sections or the information provided by the taxpayer is incorrect, then there is a chance of notice by the ITD. The Taxpayer needs to correct it immediately. The taxpayer should submit either the revised return or submit the response to the query
4. Random Scrutiny
The Income Tax Department is randomly selecting the IT returns to be scrutinized. The taxpayers needs to prepare the covering letter in explaining the reasons in his favour covering why, what, when. Upload the required documents within the time allotted by the ITD. Get an expert advise or help in submitting your response. Get a expert tax consultation today.
5. Reporting of High Value Transactions (SFT)
If the taxpayer has deposits of more than 2 Lakhs in bank, mutual funds investments of more than 2 Lakhs, Sale or purchase of Property etc needs to be reported to Income Tax Department. If not reported, then there is a chance of notice from the Income Tax Department.
More Help on SFT
Refer more @ What are high value transaction limits for Income Tax Compliance?
6. Self-Assessment Tax Not Paid
If the taxpayer does not pay the Self-Assessment tax at the time of filing the return, then the ITD may serve a notice to the assessee requiring him to pay the tax.
7. Dis-allowances / Defects in Income Tax Return
Filing of Returns is not enough in some cases. Income Tax returns should be accompanied by some forms. Below are some examples of defects in Income Tax Returns
- Foreign Income – Form 67 should be submitted along with Income Tax Return
- Arrears – Form 10E should be submitted along with Income Tax return
- If the net profit from business / profession exceeds 1.2 lakhs, then Profit & Loss and Balance sheet should be filled. Otherwise, the Income Tax return may be treated as defective. Know more on how to handle defective returns.
2. How to avoid IT Notices?
It is generally very difficult to know all the rules from a common taxpayer perspective but following basic checks may avoid most inconvenience from the Income Tax Department. Some of the basic checks would be ..
- Understand what is typical income you receive and see how they would be taxed. (Refer Income Tax Help Center)
- Understand the what are typical money transactions that you do in a month and how they are taxed ?
- Prepare and eFile your Tax Return without fail even if you have income lower than 2.5 Lakhs per year in the following scenarios
- receiving Foreign Income
- became an NRI
- owning a Business
- working as a Contractor
- having Freelancing Income
- being a Managing Partner or Director of a Company
- trading in the Stock Markets
- trading in the crypto currencies
- pass through income (non-gift) from friends and families
- Understand when TDS to be deducted when giving money to others? and at what rate such to be deducted?
- Caring what deductions that you have or planning to include in the tax returns?
- Selling a capital asset such as a house / land / machinery even if you have a loss.
- eVerifying your return after it is filed by you or a tax consultant.
3. What would be the next steps?
While Income Tax department do send the notices in an email and possibly intimated thru SMSs, often times these were ignored due to the plethora of emails we get on a day-to-day basis. Hence EZTax.in recommends taxpayers to visit ITD portal to see the notice yourself or Speak to Team EZTax.in to get help.
In case you want to see your IT notices on your own, visit How to see your IT Notices ?
or Visit other articles such as How to handle your IT Notices ? and other documents @ EZTax.in Income Tax Help Center
Tax Expert Help
Refer to know the Service, Process, and Pricing for an EZTax.in Expert to handle your Notices.
Additional Information
Refer below relevant content to address your needs.
- Refer How to Handle IT Notices?
- Refer How to check IT Notice or Outstanding Demand Online?
- Refer How to respond to an outstanding demand?
- Refer How to raise a grievance with ITD?
- Refer How to pay Income Tax due online?
FAQs
The first thing to remember when you get a notice from the Income Tax Department is to not panic. If you are not clear on how to respond, seek the help of a tax consultant. Be truthful in your replies and attach as many documental proofs as you can. If any ITR revisions need to be done, do it as soon as possible.
Why do I always get a small tax refund? ›
Changes to your income last year may play a role in receiving a smaller refund this tax season. Here are some examples: Salary increase: If you got a salary increase last year but neglected to increase your tax withholding, this could lead to a smaller tax refund when you file.
How to reply to income tax notice 142/1 online? ›
Process to File a Response
- Log in to the income tax portal: www.incometax.gov.in.
- Go to the 'Pending Actions' tab and select 'E-Proceedings'
- Click on 'View Notices' and hit 'Submit Response'
- You will be directed to a page that will prompt you to 'Select Response type for Notice'
Why do most people get a tax refund? ›
A tax refund is a reimbursem*nt to taxpayers who have overpaid their taxes, often due to having employers withhold too much from paychecks.
How to resolve an income tax notice? ›
Steps To Respond To Notice u/s 133(6)
- Analyse the reason for receiving such notice and identify if there was any actual misstatement from taxpayer side or error from department.
- Login to the income tax portal >> Pending Action >> Compliance Portal >> E Verification.
What happens if you don't reply to an income tax notice? ›
Section 245:
Section 245 of the Income Tax Act gives the Income Tax Department the authority to offset any outstanding tax liabilities against the taxpayer's due refund. If a taxpayer fails to respond to an Penalty for income tax notification, the Department may offset any future refunds owing to the taxpayer.
Why am I getting so little back in taxes in 2024? ›
If you didn't account for each job across your W-4s, you may not have withheld enough, so your tax refund could be less than expected in 2024. Or, if you had a salary increase in 2023 but didn't update your tax withholding accordingly, you could receive a smaller refund.
What is the average tax return for a single person making $60,000? ›
If you make $60,000 a year living in the region of California, USA, you will be taxed $13,653. That means that your net pay will be $46,347 per year, or $3,862 per month.
Why are more people owing taxes in 2024? ›
2024 tax refund calculator
And more taxpayers could end up owing this year, especially given that more people took on side gigs last year to compensate for higher costs, Steber said. Some of them might not have paid quarterly self-employment taxes and could owe the IRS come April 15, he noted.
What is the 133 6 income tax notice? ›
Section 133 (6) empowers certain persons in the income tax department to order any taxpayer to furnish information and evidence for tax-related enquiries and proceedings. The act grants investigative powers to assessing officers and other department officials to demand information through notices.
This notice is basically sent after notice u/s 142(1) has already been sent. It means AO was not satisfied with the produced documents or may be AO has not received any documents. If you get Notice under Section 143(2) it means your return has been selected for detailed scrutiny by your Assessing Officer.
What is 148 of the Income Tax Act? ›
Section 148 grants an Assessing Officer the power to either assess or re-assess any taxable income that may have gone under the radar, and has not been assessed as per the stipulated guidelines of the Income Tax Act.
Why am I only getting $400 back in taxes? ›
If you owe money to a federal or state agency, the federal government may use part or all of your federal tax refund to repay the debt. This is called a tax refund offset. If your tax refund is lower than you calculated, it may be due to a tax refund offset for an unpaid debt such as child support.
How do people get such high tax refunds? ›
Key takeaways
You can increase the amount of your tax refund by decreasing your taxable income and taking advantage of tax credits. Working with a financial advisor and tax professional can help you make the most of deductions and credits you're eligible for.
How to get a $10,000 tax refund? ›
How do I get a 10,000 tax refund? You could end up with a $10,000 tax refund if you've paid significantly more tax payments than you owe at the end of the year.
How do I respond to an IRS tax notice? ›
What taxpayers should do if they receive mail from the IRS
- Read the letter carefully. ...
- Review the information. ...
- Take any requested action, including making a payment. ...
- Reply only if instructed to do so. ...
- Let the IRS know of a disputed notice. ...
- Keep the letter or notice for their records.
How do I respond to a notice? ›
How to Respond to Legal Notices
- Receiving a Legal Notice: Stay calm and carefully read the notice. ...
- Understanding the Legal Notice: ...
- Consult with Legal Counsel: ...
- Acknowledge Receipt: ...
- Maintain a Professional Tone: ...
- Provide Necessary Information: ...
- Seek Clarifications if Needed: ...
- Admit or Deny Allegations:
How do I respond to a refund notice? ›
Login to the GST Portal. Navigate to Dashboard > Services > User Services > My Applications > Refunds > Search ARN > Select ARN > Replies option.
How do I respond to income tax refund confirmation? ›
To submit the response, please login to e-Filing portal >>Pending Action >>Worklist>> Response for Refund Confirmation by selecting the correct option. - The claim of refund is correct to the best of my knowledge and belief. - Return of Income is being revised wherein, correct claim of refund shall be made.